In a Form 10-K filed at the end of Starbucks’ 2019 fiscal year, the word “unions” was used just once — in the sentence “The number of Starbucks employees represented by unions is not significant.”
The next sentence said, “We believe our current relations with our employees are good.“
In a 10-K filed in February, the words “union” was used just once again — “… while the number of partners represented by unions is not significant, if a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could increase our costs, change our employee culture, decrease our flexibility, and disrupt our business.”
The report cites two union efforts in New York as cause for concern. In retrospect, the successful union drives at a Starbucks in Buffalo, NY was just the first domino to fall. 💡 Since those two have fallen, over 198 other Starbucks locations have petitioned for their own union drives. Obviously, Starbucks’ pre-pandemic assertion that its “relations” were “good” wasn’t true. Many other companies are waking up to similar realities.
18 stores have already unionized. One voted against. The story is plain to see: those numbers don’t favor Starbucks. ❌
In March 2021, Starbucks CEO Kevin Johnson retired from his post, opening up a vacancy to be filled by former CEO Howard Schultz. Although the company might say these events are unrelated, Johnson’s departure coincides with cloudy weather for the company’s management. 🌩️ Schultz, unlike Johnson, appears more invested in the surge of organized labor at Starbucks stores. To try and stop it, he has killed a multi-billion dollar share buyback program to expand worker benefits for non-union staff.
The deliberate exclusion of union staff, according to Schultz, has to do with federal laws prohibiting companies from changing wages or benefits without consulting union representatives.
Most of the “labor scare” at Starbucks can be credited to quotes straight out of the 10-Ks: the company warns of rising labor costs and other disruption, but Schultz is pushing his chips to the center of the table in an effort to prevent labor costs and disruptions during one of the most aggressive labor markets in recent memory. The future for Starbucks is still uncertain, but investors are now expecting many more mentions of “unions” and “labor” in future 10-Ks. It’s a recurring theme among multinational companies. 🌎
Whether Schultz (and other companies) will be successful in stopping the encroachment of labor is hard to know. However, the consequences could be great. 18 unionized stores have prompted $SBUX down 30% YTD.